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Friday, October 8, 2010

A CORRECTION IS DUE

The stock market is now entering the timing band for a move down into a daily cycle low. Today is the 29th day of the cycle and we usually get a final cycle bottom by day 40. Of course we need to allow some time for the decline to unfold so I think we can expect a top any day now.

The move down in stocks should coincide with a bounce in the dollar index as the dollar is already moving into the latter part of the timing band for its daily cycle low.

Since gold has been tracking the dollar almost tit for tat I expect the rally in the dollar to also pressure gold down into it's daily cycle low which is now due.



I have complete confidence the stock market will indeed move down into a cycle low. I'm also confident the dollar will rally during this process. Gold is questionable. There remains the possibility that it could be in a runaway move and miners have broken out to new all-time highs so there is a chance that gold could ignore the dollar rally.

This is why one shouldn't lose their core position. However late comers may want to wait and see if the dollar bounce does push gold down into a cycle low before adding to their core or adding leverage.

All this being said any dollar rally should be brief and the next leg down into the yearly cycle low will cause massive damage to the dollar as the burgeoning dollar crisis starts to intensify.

More in last nights report for subscribers...

156 comments:

  1. Gary,

    Well said. I would only add that the nature of the daily cycle decline will tell us a lot about what comes next for stocks. If the decline is mild and holds above the 65DMA, you may be well on your way to winning the second of our Mexican dinner bets. If the drop is deeper, you may be on the hook for 2 dinners. I figure I need to win about 40 dinners from you before it's worth buying the plane ticket to LAS :-)

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  2. If I double down I can go back in the lead :)

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  3. We may have a coil forming on the S&P that should break down as the daily cycle is now due to top. The expected move would then be for a powerful reversal higher out of the cycle low.

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  4. The currency moves are insane. Good grief. Waiting to add to miners, if gold ever decides to drop.

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  5. Completely agree Gary.

    I've positioned myself to benefit from these following moves - where my orders will execute only if they move in my preferred direction (like yesterday).
    1. Sell/short Silver
    2. Sell/short EEM (emerging markets)
    3. Sell/short USO (oil)

    I fully agree that the SPY reversal will be exceptionally powerful. In fact, compared to the above items, SPY is considered a buy, for me (never thought I'd say that).

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  6. Keys: Thanks for that exchange. It was actually clarifying for me to write it and also to read your response. I am a trader though I love being able to hold an item for six months or so if I get it right. That said, I just sold me GDXJ at 34.49, but am keeping SLV and SIL. If we get into a runaway move I'll just buy the damn thing back higher, and I know I won't chicken to buy it lower. Also shorted some Q's at 49.40 to go with my short in EWY (South Korea) and the euro (where I am in the hole some).

    This is a great blog since we got rid of the Anonymice posters!

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  7. Gary, I've been following your blog for a few months now and really appreciate your analysis. I've tried to find a definition of a "coil", but am unable. Can you define a volatility coil?

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  8. Grains locked limit up. I was patiently wating for wheat to get to 640 to get in. There goes my trade.

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  9. Hey K,

    I was confused by the word "coil", too. Gary uses it to mean trading sideways in a very narrow range. When a stock or index breaks out of the range, it's usually a false breakout which reverses strongly.

    That's my current understanding, but the image that I usually associate with a "coil" (ie. A series of connected spirals or concentric rings formed by gathering or winding: a coil of rope; long coils of hair.) is inapplicable in this case.

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  10. What's a coil - -

    http://smartmoneytracker.blogspot.com/search?q=coil

    Sometimes it shows up as an 'island'.

    http://blogs.stockcharts.com/mailbag/2010/09/what-is-an-island-reversal-kol-aapl.html

    Am I right Gary?

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  11. Wow, gold is on a tear, I seriously dont see how this isnt a run away move... then again, perhaps Im being impatient as usual!

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  12. Uh oh---the other DG is posting again. Mine is all caps and his is lower case. Hopefully that will be clear enough.

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  13. Not so much an island. Usually just a period of very tight trading where the close tends to be at about the same level as the open for several days.

    Since the jobs numbers didn't give the dollar the excuse to rally like I thought, we may have to wait for a poor earnings report next week to do the trick.

    The market will find some excuse to move down into the cycle low and when it does the dollar should rally.

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  14. The daily cycle low has been cancelled due to excessive QE, my miners are ripping back up again. I guess it is runaway move time.

    I am enjoying the ride. (been holding AGQ since 62.50) and just bought some EXK.

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  15. who else bought the shiney before the NFP release??
    i dont need the government to tell me the story. I can go outside , visit my neighbors and cruise the city to see what is happening.

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  16. This is just about what I would expect to happen. Volatile moves back and forth to whipsaw traders as gold mildly drifts down into a cycle low over the next 4 - 8 days.

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  17. Holy crap, I've got problems. Wheat up over 9%, and sugar, corn, soybeans, and cotton up over 5%!

    Nobody wants the paper money I make non-stop, each and every day. :(

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  18. Looks like I'm gonna have to print MUCHO MAS dinero to cover Tarp Dos.

    http://www.zerohedge.com/article/bank-america-halts-foreclosures-all-50-states#comments

    Es GRANDE!

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  19. Large volume hit on gold yesterday (see GLD/SLV if you don't have futures feeds) with a significant "outside reversal" day (opened, went higher on day, then closed lower than previous day). Combining with my earlier extreme RSI comments I conclude we've peaked for 2-3weeks for a correction.

    Gold has conditioned people in the last 2 months that all corrections are small ($25) and sharp (a SINGLE day). So now markets will do what they do and *break* that pattern. Markets like to hurt people as soon as they believe something is certain or a given.
    I believe the rebound rally today is a trap for those so conditioned.

    My guess is we close near these levels for the week (it will still be a strong up week), but next week we drop rather sharply (more than $25; close to $50; maybe $75).

    I agree with Gary's $1300 and/or $1265 areas. (when SLW breaks $25.50 it will accellerate down for a few days too, imo. Maybe to $23 briefly?)

    Yes, I will be using this pullback to leverage up as previously discussed. The pullback, of course, is much later than I expected, but there is plenty of profit left in the move.

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  20. In order for gold to drop for 2 to 3 weeks then we would have to be at an intermediate top.

    It's more likely the move down will only last 4-8 days and we still don't have an official swing high on gold or an swing low on the dollar.

    Until that happens we can't even be sure the counter trend moves have begun yet.

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  21. it looks like the drop into the daily cycle low for the metals came and went. The miners still lagging a bit but it seems like these corrections are getting milder and milder.

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  22. HIPTWIST,

    Thanks you for your reply on the "extreme RSI" thing. You are correct that I missed your limited date range to only 2007 when we were discussing your RSI results.

    I had assumed a discussion would include the full range of the current bull. You didn't for reasons unknown to me, but that clearly accounts for most of our disagreement.

    I'm not using london fix either. I believe the best marked price for a security is in it's time zone or currency of 'home base'. So for example, the accurate pricing of MSFT would be in NY markets since they are primarily a US company and most activities, annoucements, etc are US time. BMW might best be priced from German or London markets. Gold (as money) is primarily competing with the dollar. Thus I would take the price marked from primarily the dollar or USA time zone and not London despite LBMA projecting itself as the main market.

    As for statistical relevance, if a rocket was set to launch for the 6th time and all 5 previous times it blew up, I will politely step aside and let a test monkey take that trip. If you want to be the test monkey, it is ok with me, but test monkey #3, #4, and #5 didn't do too well.

    :-)

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  23. GARY,

    I'll qualify my exact expectations for the drop such that the lows will be the 18th or 19th (monday/tues of the week following next).

    By my definition, that would count as a 2 week decline because there is a LOWER number on the second week even if by the END of that week it rallies substantially.

    We aren't really disagreeing.

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  24. Peter,
    I doubt it. The dollar hasn't even rallied yet. More likely this is just a fakeout before the real move down. As I said in the post I'm confident that stocks will drop into a cycle low and that will cause a dollar rally.

    We need to see how gold reacts to that rally. I'm guessing it will drop into a cycle low but I'm not willing to lose my position betting on it.

    I'll just sit back and enjoy the show and if we do get a confirmed move down into a cycle low I may consider adding a little bit more to my leverage.

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  25. Impressive move past 60 minutes, but are we being roped in before a sudden move down into the low?

    The 4 week move from $1,145 was very orderly and lacked any volatility. can't say that now,

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  26. TZ: I'd normally agree with you. The big reversal day in GLD on huge volume and then the rally back into the reversal range is a classic topping formation. Given all the overbought stuff, I'd normally be shorting gold rather than hanging on to most of my longs. But this currency stuff does throw a monkey wrench into things, IMO. In panics (buying or selling ones) that sort of stuff gets overwhelmed and as gary says, becomes counter-productive and just fakes traders out. I hope you are right as I'd like to buy more metals, but I bet Gary is right that any dip will be short-lived. There is LOT of money that needs to get into gold. Your reasoning seems right that the "buy every dip" attitude does ultimately need to be wrong and suck people in to early, but I see no reason why it has to happen right now. Guessing when it will happen is just why Old Turkey works better for the vast majority of people. Why not dip for a day a few more times and catch people later?

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  27. HIPTWIST,

    I hate C, C++, Java. To me they are the most difficult way to solve a problem as long as you aren't programming an OS, or game requiringn speed. (Or some HFT or something).

    Used PERL a while ago for stuff. Clearly experienced the issue most talk about which is that no matter how well you write or document something, when you stare at it 3 months later you can't figure out what the hell it is doing.

    Ruby to me is heaven sent (although I like the indentation style of Python). It works and I can read it a year later.

    A FOLLOW UP on the "extreme RSI" discussion, the large and unexpected Bank of Japan announcement of money printing cranked gold around and shot it up for another three days beyond where I thought weakness was starting to creep in (after rising to RSI 83 then falling back). However, I still stick to my earlier comments that we will be at $1316 or lower by the 8th day.

    Maybe the rocket makes it this time though.

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  28. I take that back, I see the dollar did tag 77.76 this morning. We should now have the swing low in place. This should be the beginning of the dollar's counter trend rally.

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  29. DG:

    I'm not saying to sell anything. If I was already in with full position I would NOT BE SELLING or trying to game this pullback IN ANY WAY. (I continue to try and be clear on this).

    But a short drop of $50 or so for a few days after over a TWO MONTH rally is clearly possible. In fact, if you look at gold's history there are NO rallies that go longer than about 8-10 weeks before pulling back. Sorta a natural limit (yes...**SO FAR**..always gotta say that).

    I am not disagreeing with gary or telling people to sell or stuff. I don't have enough long and I'm just talking and looking for a way to get more.

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  30. CORRECTION: sorry, my minimum low prediction on pullback for gold based on that whole RSI discussion was $1296 or lower. I dont' want to seem like I'm backing out of my statements-right or wrong. NO, i'm not shorting or trying to play it. That's crazy. Just trying to avoid buying in high risk area.

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  31. Pretty lame swing low so far though, eh?

    I do agree that we are due, and am buckled in for a bit of drawdown and volatility.

    I think there's no doubt that there are many PM holders out there right now who have only been there through this orderly march upward and have been conditioned to this recent tame behavior. They need to have the crap scared out of them as the PMs are wont to do to people. It's a matter of time and would serve the bull well.

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  32. Market darling ANV is taking a pretty big hit today. Don't see any news out there, though I haven't dug very deeply. Maybe it's just a bit of a canary in the coal mine as big money takes some profits after its stellar run up.

    No matter to me, just an observation. I'm not holding any indiv companies, just GDX/GDXJ. I also have money in TGLDX & USAGX on the hopes that their managers can create some alpha for me, as they have consistently done throughout the bull.

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  33. Gary,

    Just so I understand you: you are keeping AGQ because (I assume) you are unsure whether or not PM's will fall as $ rises?

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  34. gary, if you do decide to add to your leveraged position, could you just let us know in your nightly update as I would like to do the same as we bounce out of that low.

    Thanks again for the efforts here !

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  35. Gary,

    When the stock correction arrives, would you expect gold to outperform silver for the time the stock correction lasts? I wonder because gold is more of a pure currency while silver has multiple functions. tks.

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  36. Pete,
    I will always let subs know in real time of any changes.

    D,
    I'm just sitting Old Turkey with what I have for now.

    JD,
    Silver almost always reacts more violently than gold because it is a thinner market.

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  37. Gary,

    Should I use starch on my new shirts?

    Seriously, people sweating it already, no chance in hell they're hanging on.

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  38. I don't own any agriculture, but I just checked DBA and DAG and...WOW.

    Oil up smartly too.

    Nope, no inflation out there folks, not even a whiff.

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  39. @catbird.

    DBA hasn't really done so well since the crash (even tho it had a big move today.) It's up about 33% since then, much worse than mkt in general and worse than PM's. I've held it off and on but it's an uneven performer imo. Not sure if etf/etn's are partic. good for following commodities.

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  40. Ag was an underperformer during the first phase of the commodity bull (02-07) so it should outperform during this phase, but we aren't going to see a bubble in cotton.

    The really big gains are going to be had in precious metals which will end up in a bubble. But one could certainly diversify a bit with DBA if they choose.

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  41. @JD

    Fair points...for whatever reason the ETF has lagged the market. Then again, it's getting close to $29 and there's a lot of air above that.

    Gonna be very interesting to see where it is in a couple months.

    That said, I want to keep it simple and just stick to AGQ!

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  42. My highest probability for gold pullback currently is about $1285.

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  43. Most gold cycle top always comes up with huge drop the day after a star formation. We don't see it today so we can assume gold is still on ongoing bull cycle and daily correction is taken part now. However, gold price has largely departed from 50MA. BTW, this is what I see and I have no idea on gold's next move :(

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  44. DBA is just another of the commodity ETFs that is doomed to underperform the underlying terribly. It's the nature of the beast. Just like UNG, USO, etc.; not to mention VXX.

    Either trade the actual futures (and most shouldn't try, IMO) or give up on trying to hold commodities like these. Or you could also try to participate by buying companies in the sector but that is not the same, of course.

    They're money vampires that only serve to make the boys on Wall Street rich. It's a big scam that just takes advantage of naive' retail "investors" who think they can diversify into commodities this way like the big boys.

    Stay away is my best advice; other than maybe for a quick trade (though most retail traders get shaken down doing that). But to each his own.

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  45. There's always MOO instead of DBA.

    I had my eyes on AGU this summer at 50 and decided not to do it. Up 60%+ from that point!

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  46. (On looker said it best. DBA has been a piece of trash like it's crappy peers (D)UNG, USO, etc. I think MOO is the Ags equiv of a GDX

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  47. To participate in AGs, you might look at CORN, which went public a few months ago. Been in since July. Huge gap to the upside today.

    Us Ol' Turkeys like CORN. Gobble, gobble.

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  48. Speaking of agriculture etfs, take a peek at Jim Rogers' RJA today.

    +6.9%

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  49. Not much of a dollar bounce thus far. On the fence whether to get into Gdxj here...I hate it when I procrastinate.

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  50. I've sold another 1000 QLD and am now holding the last 1750 shares from the August low. I'll probably keep these for now, recognizing that markets almost always trend further in the direction they're going that seems reasonable.

    Perhaps a big gap up on Monday might invite a fade, or as Gary has said, maybe an earnings disappointment later in the week will turn it.

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  51. Speaking of things that might turn the markets, perhaps a close above 11,000 is all we need. I sometimes watch CNBC at the gym, and they have been pushing it.

    What better time for an intervention in the currency markets than after a weekend ?

    Just idle speculation.

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  52. Gary-

    You're showing a swing low on the debt backed Federal Reserve Note today? That chart looks pretty weak to me, I know the "timing band" says it should form it's swing, but chart says I want to go lower here.

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  53. Jay,
    Remember all the gold bears that told me the chart of gold in July was saying it was going lower?

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  54. Quite a strong Friday! I'm curious if we get that weakness next week or the party in power wishes to goose the market right up into election day in early November. That would be quite a convincing story to voters, "hey, look, the market says everything is OK!" Well, don't look at the dollar voters, nothing to see there!

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  55. I'd be surprised if the dollar tagged 80, maybe a couple days and a weak attempt at 79, then pluuuuuunge.

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  56. Not only the market says so, but I also confirm "Everything is OK!"

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  57. Jayhawk, would love to chat about your family story. My wife is due with our first little one and we have gone back and forth on the whole home birth thing.

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  58. Oh man, we have had some adventures with home births! Our last 2 have been with a wonderful midwife out here in CO-She was the best and the care my wife received from her was head and shoulders above the doctor who did our home births back in IL. Where do you live?

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  59. TZ,

    I just did the RSI-test with another data set: Concatenated futures data 1995-2010. For whatever reason the RSI-extrema are still rare: >78=15, >80=10, >82=8, >84=4. The tendency in the results is the same: Some weakness in days ahead but no statistical significance I would bet my money on.

    Generally I agree to your "home base" argument. To use it for gold - I'm not to convinced, as long as I use the price in USD. For a valid system I require it to be stable. And this includes, that it gives similar results with comparable data feeds.

    Your rocket metaphor is not well chosen: YOU are the pilot in the rocket with the argument that it flew the last 5 times. I refuse to enter and miss an opportunity in the worst case. The next one will come for sure.

    I completely agree with your opinion about the usage of C and C++. Java has too much overhead for my gusto. PERL can be used as "write-only" language. But there's more than one way to do it :-). So why change a running system...


    @Gold Era,

    could you explain what a "star formation" looks like?

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  60. "Jay,
    Remember all the gold bears that told me the chart of gold in July was saying it was going lower?

    October 8, 2010 12:48 PM"


    I thought it was too! I must admit you have been solid after a rocky start back in Jan/Feb.

    Remember how gold rose in the face of the strong USD in the Spring while the Euro was getting trashed? I have a feeling we are going to be playing musical chairs with various currencies taking their turn getting SPANKED. Point being, D-waves like we saw in the past could be ancient history. I know gold and silver can provide some drastic corrections, but from now on I believe they will be short and sweet. :)

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  61. Jay, I'm in the San Francisco Bay Area. What is a good email for you?

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  62. Are you on the Doc member site? I can post it there.

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  63. Yup, I see your point, a bit more controlled environment there!

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  64. I can prety much guarantee we will have a D-wave decline and it won't be short nor will it be sweet. It will be nasty and it will take everyone who gets in at the top to the cleaners.

    It will also be neccessary if this bull is going to continue.

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  65. Gary-

    I bet you a Mexican dinner the next D wave is the mildest one yet!!!!

    :-)

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  66. The further rally today pretty much eliminates the coil theory for the S&P.

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  67. You got it.

    D-waves aren't about fundamentals they are about regression to the mean and that occurs in all assets no matter what the fundamentals are.

    PM tend to stretch extremely far above the mean because of their emotional nature. When that finally exhausts they come crashing back down.

    I expect this C-wave to be the largest of the bull market so that suggests it will also crash hard. Actually a test of the 200 DMA is a good sign that the D-wave is getting close to bottoming.

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  68. Gary-
    Do you (or have you) ever short D waves in P.M.'s

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  69. I'll say it again. Never, never, never, never, never short a bull market. :)

    I just go on vacation for a month or two during D-waves.

    I can assure you that you will most likely lose money trying to short a D-wave.

    First off you will miss several times trying to time the top. Then just about the time you become convinced the decline has begun we will get a violent oversold rally and you will get knocked out of your short. Then of course after you cover for a loss the D-wave will continue down.

    It's much better to just do something else for a couple of months than whittle away at the cash you made during the C-wave.

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  70. Gary, so are you saying no move into cycle low for S&P or that the break down from coil followed by a stronger move in the other direction may not pan out?

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  71. Oh we will have a move into the cycle low, of that I have no doubt. It's just not going to play out as a coil breakdown and reversal.

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  72. I appreciate your bashing of the dollar - it does deserved to be bashed. But to say it is collapsing when it has already collapsed is a bit of hyperbole. Check out http://www.chartsrus.com/chart.php?image=http://www.sharelynx.com/chartstemp/free/chartind1CRUvoi.php?ticker=FUTDX. Notice that peak in 1985 at 160, even 120 in the early 2000's. And here we are at 77 - the dollar is already 52% and 35% down from those levels respectively. If you're looking to go to 70, that's only 10% from here. The Euro went from 150 to 120 earlier in the year in a little over 6 months which was a 20% drop and I didn't hear it called a collapse.
    I know I will probably will be laughed out of here, but don't you think that, just like everything else, the dollar could be so unloved, unwanted, so despised at this coming "collapse" that it could turn around. I'm not talking about a 6-month rally like it saw earlier this year, but a long-term rally similar to what we saw from 1980 to 1985. Nah, I'm not exactly convinced either. But sentiment is so skewered, selling of the dollar is getting so exhausted, that I just want to plant some different seeds (some will say marijuana seeds). Indeed, Old Turkey has worked well so far and I will give you that, but something might happen on the way to $5000/oz gold.

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  73. CK,
    We will definitely see a major rally out of the three year cycle low just like we did out of the 08 low. But for the trend to change the Fed has to make a policy change. Any long term secular move has to be backed by fundamentals. As long as the Fed continues to follow these flawed Keyensian policies the dollar will stay in a bear market.

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  74. I will play the D-Wave by buying a small position in UUP when it is extremely oversold into the 3 year cycle bottom. appx 15% allocation.

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  75. That would be a much better option than shorting gold

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  76. This comment has been removed by the author.

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  77. ENJOY weekend all.
    A bit of late interests:

    Gold and silver commercial shorts actually REDUCED positions into the continuing gains of this week. VERY interesting and unusual.

    http://snalaska.net/cot/current/charts/GC.png
    http://snalaska.net/cot/current/charts/SI.png

    http://www.321gold.com/editorials/hoye/hoye100810.html

    Hoye on board with the corrections Gary is predicting (and me too I guess). He's calling a dollar exhaustion and a pullback in gold (in the same time frame as gary) to 50dma (roughly the same point I mentioned earlier as my pick).

    More interesting stuff in hoye's post.

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  78. I hold a position in sugar (SGG ETN)which I accumulated when it was bottoming few months ago. It has been quite amazing so far, second probably only to AGQ. Showing a 56% gain in my portfolio over a few months. It tracks the sugar price quite faithfully over that time. You can check it out using the ratio SGG:$DJASB on stockcharts.
    My plan for this is also old turkey. The problem is that I do not have something like an ABCD wave structure like Gary has for gold. I am not sure when to exit. If anyone has any ideas please share :-) I tried looking at cycles. The daily moves like clockwork averaging 31 days. Range is a tight 28-34 days. Last low by my reckoning was Sep 21. So we are 13 days into this new cycle for sugar.
    I am considering switching out of sugar to PMs since the latter can be more easily analsyzed.
    I did hold grains ETN JJG also accumulated during the bottoming but even harder to analyze. So I switched out of it into miners a few days ago on weakness in PMs.
    But of course after I switched out of it, it goes and jumps 10% on me yesterday! Such is life!
    When I switch out of sugar, I will let you know. I am sure it will jump 20% the day after I get out.

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  79. Oh I forgot to add that an ETN is different from an ETF is that the ETN has a default risk associated with the issuer.

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  80. RA,
    You could sell when the dollar bottoms as the dollar is a big component of all commodity rallies.

    You certainly want to sell when we get the 3 year cycle low next spring.

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  81. Gary said:
    "We will definitely see a major rally out of the three year cycle low just like we did out of the 08 low. ..."

    I read today an interesting article which seemed to be a propaganda announcement by the IMF through Der Spiegel (...even though ironically Germany is the main opponent to the IMF's rapid ascension to global power).
    (It openly boasted the New World Order ideal a couple of times.)

    http://www.thedailybell.com/1425/IMF-Article-Predicts-New-World-Order.html

    "...The IMF's willingness to provide loans under the PCL to countries which, in its own words, "may not meet the FCL's high qualification limits..."

    ..."It means a de facto obligation to provide unlimited liquidity in euros..."


    Their boss was giving the EU a lot of stick as being much weaker than most of us think .

    So maybe this will be the word on the street when the dollar hits the 3 yr cycle low.
    J

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  82. If gold ignores the impending dollar rally, it could be because the sovereign debt issue in Europe is resurfacing.

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  83. Gary,

    If the USD falls below the Thursday low on Monday, would it mean an extremely left translated failed daily cycle in your opinion?

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  84. No it would still be trying to bottom.

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  85. Gary,

    Most people (including you, I think) associate the rise in price of gold with inflation, specifically as it is related to the various QEs by the central banks.

    But the way I see it, we have a much greater, systemic problem of demographic changes that are looming ahead when shrinking populations will have to support the ever ever expanding numbers of retirees who had been promised unsustainable levels of benefits (both as pensions and as medical coverage) and these are not specifically US problems. All developed countries will have to print gobs of money for decades to come as bills from the retirement schemes come due.

    Is it possible that this growing realization is the MAIN driving force behind this gold bull? And if that is the case we have probably many decades to go?

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  86. That is a part of the problem.

    The problem is debt in all it's many forms. The world embarked on a debt orgy the last 30 years and now the bills are coming due.

    There are only two ways to cleanse the system at this point. We can either default or inflate.

    If we default we will have a deflationary depression worse than the 30's. I doubt we will be willing to do that so I expect the powers that be will continue to inflate expecting to avoid a 30's style deflationary depression.

    What they refuse to accept is that there is no way to avoid the depression, it is an inevitability when a credit bubble forms and bursts.

    In our vain atempt to avoid another deflationary depression we will instead create a hyperinflationary depression.

    Gold is just positioning for a failure of the fiat currency system.

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  87. So much for a dollar rally. Bye bye gold train, agggh.

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  88. Dollar just made a lower low... this thing is not done.

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  89. U r wrong.

    Dollar has not made new lows yet.

    It's low on 10/07 was 76.906- we have not crossed that yet.

    IF ur googling "dxy" that chart and the lows will give you only closing price information (very misleading).

    DYODD.

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  90. Robert,
    Where are you getting that number? I see 77.15 on 10/7 and 77.05 tonight. Thanks.

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  91. Go here and you can see any dollar price (Hi and Lo) on date you want.
    http://www.marketwatch.com/investing/index/DXY/historical

    10/7 low was 76.91
    (Is this what you show Robert?)

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  92. Arcadefire, both Bloomberg and Stockcharts.com show the 76.906 LOD on Thursday.

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  93. Does anybody watch CNBC anymore? The reason I ask is that I quit watching tv about 18 months ago, and have made more money than ever before in my 16 yr career.
    Just wondering if anybody else has had similar results. It seems like more "info" is not better, especially when it's blatant propaganda. I used to think I could filter out the media lies and glean what was useful, but it clouded my program worse than I liked to admit. The proof is in the results since I junked the propaganda box!

    Good luck this week, and remember that everything is OK.

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  94. SB wrote "Does anybody watch CNBC anymore? The reason I ask is that I quit watching tv about 18 months ago, and have made more money than ever before in my 16 yr career."

    Good observation! I quit watching TV almost completely some years ago. One of the best decisions I ever made.

    The main reason for the positive effect is probably not the propaganda but the following: TV is a push mechanism for information. It's not you who decides what to see/read but the TV-sender. So read blogs, newspapers or books to be really informed and steer your own way through the information ocean (a pull mechanism)...

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  95. ... and as a second reason: Pictures are much more manipulative than something you read, as you have more time to question the assumtions which are made: A TV spot doesn't wait for your to digest and agree.

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  96. I've sold 750 QLD at a QQQQ level of 50.00 which somehow seems right.

    I have 1000 QLD left.

    I'm ready for the stock market top.

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  97. Yeah, Wes. As a trader I am short euro, EWY (Korea) and Q's. I will probably add by day's end. I look at this as a hedge against my metals holdings (which I only sold a little of) [Gary: please don't read that last sentence.] If we don't dip I will cut my losses off, of course, but as well as the dollar imminent rally and everything else, we are entering the worst seasonal period of the year. With the VIX near its low, this has a high lower-prices result over the years. We'll see!

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  98. Good points, hiptwist. The internet allows one to search for answers to questions they have chosen to ask, vs tv which determines what the viewer should "learn", often being nothing more than propaganda and consumerism.

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  99. I quit reading papers as well as watching the news etc on tv more or less completely a couple of years ago - and feel FREE!

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  100. I see on another Gary's blog over at
    http://www.biiwii.blogspot.com/

    that his inside friend at the Comex writes today that last Thursday's $40 swoon was only contracted by ~1500 contracts and showed more short covering than selling. More net longs from large specs, quite a lot of selling by small specs [us?!] and modest commercial short selling.

    This might be indicative of only a small drop in gold on this cycle...

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  101. Gary, is that you?
    http://www.biiwii.blogspot.com/
    Sounds like it.

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  102. DG,
    You do realize that if you sell your positions gold will never be able to correct :)

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  103. Gary, have you noticed the coil in XLF & IYR? Ya think we get the old false move misdirection?

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  104. Yes, Gary, I am aware that if I sell anything at all gold will be unable to drop even a little. My plan is to do this a few times, establish a track record, and then solicit donations from your subscribers. That would make your blog useless as gold would simply go up a every day as I sold off one share of something a day, but that's life I guess.

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  105. I wasn't expecting a dollar rally with gold up.

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  106. wes, see you are unwinding your qld step by step.. where is your original holding? 5k, 4k 3k..

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  107. I don't think it is possible for gold to go down...ever. It only goes up. there is nothing that can change this. Watching intraday is seriously unreal. Any small dip is met with ferocious buying. "Gold is down a dollar, better buy some" "Gold is only up $5, better buy some". I beleive this rally has been one of the longest trends I've ever seen on a daily chart with absolutely no pullback.

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  108. eem looks like getting tired??

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  109. I owned 8250 QLD shares at the August bottom. Not all of them were bought at the bottom, however. I scaled in starting about mid-month.

    I have also bought as well as sold additional shares on the way up, buying weakness and selling strength.

    I'm not expecting this bottom to be as easily scoped out, but with Gary's help, who knows.

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  110. After a long run and (apparent) blowoff in gold like we had last thursday, it is not uncommon for such a security to move *up* or hang tough for mon/tues of the following week before commencing to drop.

    The action we are seeing today and maybe tomorrow is NOT abnormal even if we have peaked for a bit.

    I'm still of my opinion that a drop to about 1285 is coming. My earlier "extreme RSI" argument goes out to wed and then falls flat. If I got that one wrong I'll freely admit it. (An interesting twist this time is that the RSI went very high, dipped, then went *even higher* after the Japan QE announcment of last week. Never had that specific pattern before, but I'll stick to my original argument and see if we get my expected drop by wed.)

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  111. http://www.cnbc.com/id/39606951

    *EVERYBODY* is now expecting QE2 in Nov. Recall how markets work and recognize that if the Fed alters this perception at this point it could have some significant effects on the market - even if only temporary.

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  112. Since I'm looking for a top anyway, I'm not liking the lack of upside progress since this morning.

    I've sold my last 1000 QLD and am "all out".

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  113. Yeah, TZ---I agree. A high-volume reversal and a rally into the heart of the reversal is a pattern I often short. I have no interest in shorting gold here, but have been shorting others stuff (just added some EEV to the list). I'm not all that bearish but I couldn't stand watching my PM's go down without doing something about it, and I think they will all move together (though today I am winning on my shorts and my PM's).

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  114. For you bond traders out there: TLT has been diverging from IEI (the Intermediates) and looks tired. A break below last week's low of 103.93 could be trouble. MACD is weak, too. Maybe---Finally!---TLT is going to succumb to what has put gold up so much (?)

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  115. DG

    What you say if I told you that TLT looks almost just like gold did in Feb-Mar? Actually maybe a bit better here as it's holding around the 20 DEMA and well above the 50, which are also still in a bullish configuration here.

    And of course many were saying that exact same thing about gold then.

    I'd say that TLT correcting off of the sharp run up in a high consolidation (so far) is quite bullish at this point. And if stocks do correct here then we're likely to see bonds catch another strong bid.

    So apart from the fundamental arguments that say bonds "should" be going down, given the technical picture, and with the Fed likely to go on a buying spree again soon, I wouldn't bet on it at this point myself.

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  116. Onlooker: You could be right. That's why I never enter a trade without a firm stop. If you short at 103.90 and your stop is 106, you risk about 2%. If you believe your realistic gain is 10%, you've got 5-to-1 in your favor. If you are really cold blooded about the stops and the risk reward analysis, you can't realistically get hurt. I'm not smart enough to know how the macro world will play out (though I have my opinions) but I'll trade anything if I can severely limit my risk. If you can find heads-you-win/tails-you-break- even trades, you just need to keep betting. Then once you are ahead, hang on unless the trade gets back to your stop-loss at beak even, to give it a chance to work. At least that's how I trade...

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  117. This comment has been removed by the author.

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  118. Gary,

    When the hell is gold going to correct already?

    This parabolic move is getting downright creepy.

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  119. David

    It's not parabolic at all, just a relentless and steady march upward that is unnatural looking, for sure. But then all you have to do is look at the straight line 45 degree drop of the dollar and the move is well explained.

    Of course the question is how much bounce does the dollar have in it, and will PMs react much to it. For now they've only reacted a bit on the intraday time frame and then resumed the march upward.

    Interesting times, for sure. And I'm sure glad I'm long PMs here and not a frustrated sidelined bull or worse a self destructing bear.

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  120. I ask because I unloaded %10 of my PM position today in expectation of a correction.

    It's hard to imagine that there won't be any consolidation after this move. But at times it seems the laws of gravity have been suspended.

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  121. Heck I understand that David, for sure. I trimmed my leveraged positions off and now am pondering when to put them back on. So far it's cost me some opportunity.

    I still seems that we've got to get some pull back as the dollar gets an oversold bounce. Maybe the market's just trying to lure in those last buyers here who become convinced it really won't correct. But then again, maybe it won't! :-)

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  122. Gold bulls are tough to trade aren't they :)

    That's why I refuse to do it. I'll be damned if I'm going to make the same mistake again that I made in 03.

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  123. i am short here with tight stop, the fact that we had no new high on gold after horrible jobs report and no resolution on the currency debate over the weekend tells me some sort of pullback is coming

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  124. I'll say it again. Never, never, never, never, never short a bull market. Even if you mange to spot the top which you usually won't you will almost never manage to exit at the right time before the bull comes roaring back and all your profits evaporate in the blink of an eye.

    Especially never short a runawy move which this is showiing sign of being. just buy dips when and if they come and save the shorts for the stock market when the time is right.

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  125. i guess i should listen to you, i have been long since you called the bottom at $1155 and ended up getting in at $1180. I really dont want to lose my profit but i get bored sometimes and have itchy fingers :)

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  126. Maybe you need to whack those fingers with a hammer and cure that problem :)

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  127. I've only trimmed %10. This is the first time I've sold anything in the PM sector. I am normally Old Turkey, but the sentiment readings -- 98% bullish on gold -- are just too much for me.

    The other %90 of my position will stay intact until the spring, no matter what.

    In part this exercise is practice for selling everything prior to the D-wave.

    But even taking %10 off the table makes me anxious.

    If we don't get a correction this week, I may re-deploy that %10 and go back to Old Turkey.

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  128. David,
    Ignore the EW sentiment data. It's pure BS designed to shock and awe bears into buying a subscription.

    Nothing ever reaches a 98% sentiment level. The true gold sentiment level is 74% bulls.

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  129. If this is indeed a runaway move, then you've said we can expect a crash of some sort at the end of it.

    Either way it seems we have to revisit these levels, so letting a little bit go right now seems to make some sense.

    I have to say, though, that the traffic on your blog does not indicate super-bullishness. More like a lot of nervousness about the possibility of an imminent correction. When we finally get that correction, you are going to see people throwing money at the sector, so any correction is going to be shallow.

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  130. What's most remarkable is that someday, when gold finally goes into its terminal parabolic phase -- day after day of %5-%10 up-moves for weeks on end -- we will look back on this and it will seem like nothing.

    Think how hard it will be to sell then!

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  131. A runaway move can go on for a long time and the crash doesn't have to be a major crash. It could unfold as a $100 down day. But if gold is at $1800 by the time the end arrives then you aren't even going to be close to seeing $1300 again.

    Unless we get a correction soon I would say the odds are good we are never going to see $1300 again for the duration of this bull.

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  132. Gary: What do you use for gold sentiment? Jason's "public opinion?"

    I shorted stocks the last few days in anticipation of a dollar rally and gold decline. Even as much of a trader as I am, I am a believer in not shorting gold in a momentum move like this. I lightened up a little, but will be fine if it keeps going.

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  133. Yes the public opinion poll.

    I can say without a doubt that sentimnent hasn't even come close to reaching the giddy levels we saw at the Dec. 09 top.

    I know what that looks like and I can tell you we aren't even close yet.

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  134. I'm refering to the sentiment on the blog BTW.

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  135. I've just now have started to have an occasional acquaintance or two ask me about gold. I agree we are not even close. I remember in the early 80's when I was in the business, I had a ton of people asking me how they could buy oil. Which stocks, which partnerships, which drillers, etc. I sold every share I and my clients owned, shorted oil, and made a pile. It's pretty easy to see when a big bull is getting late. Stocks in 2000? Pretty clear. Gold in a bubble now...don't make me laugh. If the bull isn't over gold will be higher later by definition.

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  136. Gary,

    How much value would a subscription to sentimenTrader add to my participation in this SMTPremium?

    ReplyDelete
  137. Well I usually mention anything significant in the SMT reports but if you want to get the info first hand certainly.

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  138. Happy Gobble to the Cads out there.


    Perfect time to say Gobble Gobble. I am enjoying not being part of this....are we correcting or not mess, don't care....yes we will correct, but really! Do we want to make money, or starve in front of the computer....anyways.....

    I hope all is well for all traders!

    If anybody can trade better than a buy and turkey please let me know....
    I guess I will hear it once we hit a real drawdown, but I still doubt most will beat a buy and turkey!

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  139. Perhaps I'm a contrary indicator, but I'm feeling a correction coming. I have been strongly in the runaway move camp for a few weeks now, but am sensing a pullback of 60 to 80 points coming. No biggie. I'm not doing anythng about it. But, I may add a bit on a swing low.

    I suspect there will be a greater reaction (correction) after the Nov elections or in anticipation of them. People somehow appear to be associating the Republicans with fiscal responsibility. Man, is the public that forgetful....or blind? There has been no difference between Reps and Dems in the area of spending for decades now. Anyway, that's what I see coming.

    FWIW

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  140. Interesting (contratrian?) article on Marc Faber interview with Bloomberg.
    A bit confusing at first when he said interest rates will rise and dollar might strengthen, so "sell cash and bonds" and "buy stocks". If USD will strengthen, then why sell cash?
    I guess what he might mean is that USD will strengthen relative to all the others, but all currencies will go down against stocks. So USD and stocks go up together?
    He does not mention gold either but I suspect he will say it will be the same as it is for stocks because of "money printing".

    http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=anCkJfxt6Hf0

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  141. I was hoping for that overnight correction to stay put so I could enter a position. Poof gone before the open... :*(

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  142. Glad I have the asian shorts and Q's I have been posting the last few days, as they more than offset my PM holdings. I agree with Gary, that this decline will be short in time, but sharp I believe. The sharp ones scare more people, and we need more concern everywhere right now. The folks waiting for a pullback in gold need to act into this weakness and not get scared out of buying. That''s the trouble with trading: when you finally get what you want you tend to chicken out.

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  143. I don't know if the dollar can manage enough mojo to tag 80 but if it does that would be the buy signal to establish full positions.

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  144. remember my earlier comments about everybody now expecting massive QE in Nov and how if the Fed started negating that trend? Well...looks like they started

    http://news.yahoo.com/s/ap/20101012/ap_on_bi_ge/world_markets_12

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  145. Gary,

    What do you think of my brothers at Golden Sacks saying BUY GOLD!?

    http://www.zerohedge.com/article/goldman-tells-clients-buy-comex-gold-13642-raises-12-month-gold-forecast-1365-1650-silver-27

    Contrary indicator or not?

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  146. Make no mistake folks sentiment will play no part in this rally. It will be purely driven by the fundamentals, namely the collapse of the dollar into the three year cycle low.

    TZ,
    whether or not the Fed runs the presses again is irrelevant the damage has already been done last year with QE1. The dollar will crash into the 3 year cycle low all the Fed can do at this point is make it worse. They can't stop it.

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  147. http://quotes.ino.com/chart/intraday.gif?s=NYBOT_DX&t=f&w=15&a=2&v=w

    Also the dollar, to me, looks like a perfectly angled buy program is ramping it up. They are chipping away at this thing and after a 2 month gold rally I *think* they can crack it to the downside in another day or two at most.

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  148. http://www.cnbc.com/id/39626164

    Google plans an INFLATION INDEX!

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  149. That's all we need, the GPI. The kind of stuff that people by online is typically electronics or typical "Made in China" junk that inherently shows "deflation" due to improved efficiency, etc.

    Although if it induces B. Shalom Bernanke (I am allowed to call him that still?) to run the presses harder, then it's good for us.

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